Sethi Finmart Pvt. Ltd. is registered with the National Stock exchange (NSE). It has taken its membership in the Cash, Derivative and the currency segment of the exchange.

• Registration of Clients:

 

• Persons are added as clients only after they have had a meeting with the director / sub-broker / employee of the company.
• The Application forms for opening an account are issued only when the management is satisfied with the client’s financial capacity to trade in stock market and after the prospective client provides the valid reference for his account.
• Client registration documents are in accordance to the format specified in SEBI circular Ref CIR/MIRSD/16/2011 dt. August 22, 2011.
• Know your client form duly filled, complying with the mandatory requirements as specified by the SEBI & Exchange are processed further along with RDD, Rights & Obligation, Dos & don’ts, Supporting documents, proof of bank account, etc are collected from all the clients. The forms are accepted only after they have been completely filled and signed / initialed by the client.
• The company has the policy of approval of all application forms by the Director of the

company before allowing trading to applicant.

• The details are entered in the back office software by the maker of the document. Further a senior person acts like a checker to see that the details have been properly entered in the back office software to avoid any issue in future.
• Walk-in clients are not entertained and only clients through reference are enrolled.
• The client registration modalities are carried out in-house and not outsourced.
• The documents are stored at the office and filed properly for easy retrieval whenever required.
• The clients only through reference are entertained. The financial capability of the client is also assessed from various parameters. 2 years balance sheet is taken from corporate clients. The financial documents are taken from the individual clients also, however if the individual clients are not comfortable providing the financial document, then a declaration is taken specifying the income details to provide the information to the organization regarding the income details.
• The financial capability of the client is assessed on the basis of discussion / disclosure / income tax document like ITR return or Income tax order.
• With reference to updating of clients financial information, the clients are requested in the statement of funds/securities sent on monthly/quarterly basis to provide their financial details. Client have also been sent draft letter for providing the feedback.
• With reference to the particulars of the client information, the same is checked on the basis of cheque received for bank information, demat receipts for demat account, etc. Additionally the clients are given reminders in the quarterly statements to provide update on the changes, if any, for the information already provided.
• We have proper maker checker concept to avoid misuse of information provided in the KYC.
• Any change in address, e-mail id, contact details, etc is entertained on proper written request.

• In-person Verification is conducted by the various employees of the company at the Regd. Office/ head office and at/ dealing office. In case of clients not located at head office / dealing office, then company employee visits them in person to carry out in-person verification.
• The duly executed client registration documents are sent to clients by courier along with the welcome letter or the documents are handed manually to the client.
• The UCC is uploaded by the back office department and the compliance officer or manager of the Client Registration process carries out this activity before any trades are inputted on behalf of the client.
• We don’t have any separate marketing division and hence no norms are applicable.
• We have not launched any promotional schemes till date.
• The clients are informed about the risk associated in equity / derivatives / securities trading at the time of their registration.
• We don’t offer any type of freebies like free demat a/c, etc. to our clients.
• Client is registered only after verification of PAN from the website of Income Tax department and also by verifying that the prospective clients name do not appear in SEBI ban / debarred list.

 

• Closure of client accounts:

• Closure of account is done only on request of the client in writing. The member does not close any of the account. The client account can be suspended temporarily if requested by the client then the same can be reactivated on the written request of the client only. During the period client account is suspended, the market transaction in the client account will be prohibited. However client shares/ledger balance settlement can take place.
• On the request of the client in writing the client account can be closed provided the client account is settled. If the client wants to reopen the account in that case client has to again complete the KYC requirement.
• Wherein a request is received from client for the Transfer of client from one branch to another, the Procedure to be adopted is not yet devised but will be made and communicated as and when branches are opened.

 

• Notwithstanding anything to the contrary stated in the agreement the stock broker shall be entitled to terminate the agreement with immediate effect in any of the following circumstances:
• If the action of the client are prima facie illegal / improper or such as to manipulate the price of any securities or disturb the normal/proper functioning of securities or disturb the normal/proper functioning of the market either alone or in conjunction with others.
• If there is any commencement of a legal process against the client under any law in force;
• On the death/lunacy or other disability of the Client;
• If the client being a partnership firm has any steps taken by the Client and/or its partners for dissolution of the partnership;
• If the Client suffers any adverse material change in his/her/its financial position or defaults in any other agreement with the Stock broker;
• If there is reasonable apprehension that the Client is unable to pay its debts or the Client has admitted its inability to pay its debts, as they become payable;
• If the Client is in breach of any terms, conditions or covenants of this Agreement;
• If the Client has made any material misrepresentation of facts, including (without limitation) in relation to the Security;
• If a receiver, administrator or liquidator has been appointed or allowed to be appointed of all or any part of the undertaking of the Client;
• If the Client have taken or suffered to be taken any action for its reorganization, liquidation or dissolution;
• If the Client has voluntarily or compulsorily become the subject of proceedings under any bankruptcy  or insolvency law or being a company, goes into liquidation or has a receiver appointed in respect of its assets or refers itself to the Board for Industrial and Financial Reconstruction or under any other law providing protection as a relief undertaking; (xii) If any covenant or warranty of the Client is incorrect or untrue in any material respect;

 

• Inactive Client account: - Client account will be considered as inactive if the client does not trade for a period of one year. Calculation will be done at the beginning of every month and those clients who have not traded even a single time will be considered as inactive. The  shares/ credit ledger balance if any will be transferred to the client  at the earliest from the day of identifying the client as inactive.The client who has been inactive is eligible to trade only after he has made a written request for reactivation of their account and the same has been granted to him by the Director/compliance officer.

Dormant account:

• Client account will be considered as inactive if the client does not trade in any of the segment of any of the Exchanges for a minimum period of 1.2 or more years.  The client has to make a written request for reactivation of their account and the account will be activated only after all the latest KYC requirements have been fulfilled. Adequate margin provisions will be made before the said client will be granted permission for trading. The final approval will be given only by the Director.

 

• Receiving, validating & entering the orders of clients in trading platform:

• The Organization setup is small and all the client are personally known to management/sub broker, their financial position is known and the dealer is aware of the risk appetite, family , financial and business background, family members, family accounts of  each and every client who is a part of his group which helps in better control.  To give better & personal service to the clients they are divided group wise among the dealers so that particular dealer can serve a particular group of clients which helps dealer to understand client investment strategy in a better way & serve them accordingly. In cases exceeding the normal trading pattern, the dealer contacts the front office head to decide on the trade. The orders are entered instantly as given by the client without any delay.

 

• The company has restricted the access to the dealing office only to the authorized persons who are dealers and sub brokers of the company.
• The approved clients are informed of the dealers / sub-broker who would be responsible for receiving, validating and entering the orders on behalf of them.
• The orders are received over phone, via e-mail, through sub-brokers, personal instructions when they are in the office. There is no telephone recording system for receipt of orders as the dealers are familiar with the voices of the clients who are a part of their group. The dealers are also familiar with all the family members, family groups and family accounts handled by a given client at a point of time.
• Exercise of discretionary powers are generally not used to execute client orders. But the management keeps the powers to use discretionary powers in case where it finds that the trading done by the client is not in the rightful interest of any body.
• On execution of valid order into trade, dealers confirm the trade with the client so as to avoid any future dispute.
• The clients are informed regarding the trades executed through ECN issued from the back office. Alternatively, after market hours, back office team informs the client about their executed trades for the day and also about their obligation towards Pay-in & Pay-out of funds & securities for the particular day.

• Collection & release of funds to client:

 

• Payin and payout of funds are done in accordance with the rules of the exchange.
• Most of the clients have given consent to the company to maintain running accounts on their behalf to avoid trouble of receiving / paying funds on daily basis. As decided by Risk Management Officer in case of some clients no trades are done until the funds are received in advance.
• There is proper bifurcation of own and client funds and both are held in their designated separate accounts.
• The company collects and releases funds through banking channels i.e. Account Payee Cheques & Demand Drafts only. The pre funded instruments and demand drafts are dealth with a separate policy specially dealing with this. With broadening of banking services RTGS/NEFT has also become a prominent way of receiving / paying funds.

• The account team keeps proper co-ordination with DP team regarding Pay-in of securities by clients and then releases the Pay-out cheques to the client. In case of shortage the amount is released as per the decision of managing director to give part money or not. 
• Company releases payments of the clients either by hand delivery to the authorized persons intimated by the clients or by courier to the client’s correspondence address as informed by the clients. In some cases cheques are directly deposited into client’s account.
• The collections of funds from clients are also transacted in above manner, cheques are sometimes directly deposited by the clients.
• The cheques given by the clients from accounts other than those mapped in KYC are not accepted. Hence there is no third party funds.
• All the bank accounts are reconcilied on daily basis.

 

• Collection & maintenance of margins:

• The company transacts on behalf of clients in cash & F&O. On the basis of the risk, study of the RMS department and management  policies, margins are collected from the client as and when  required.
• The company follows a healthy practice of having the margin money in hands in advance before entering any trades for the client.
• The company is not providing margin trading facility.

 

 

• Collection & delivery of securities to client:

• Payin and payout of securities are done in accordance with the rules of the exchange.
• The company has received authority from clients to maintain running accounts on their behalf to avoid trouble of receiving / paying securities on daily basis. As decided by RMO in case of some clients no trades are done until the securities are received in advance.
• There is proper bifurcation of own and client securities and both are held in their designated separate accounts. Proper record is maintained for client securities held/lying with the member.
• The company receives the deliveries of securities from the clients in the pool accounts intimated to the clients.
• For delivery of securities company has activated auto payout facility in clients demat account, for which daily report is been sent to the Clearing House.
• The company also reconciles its pool, principle, CISA and client beneficiary account on a daily basis.
• The company has subscribed for Speed-e facility to monitor online the activities of pool and other accounts.
• The securities given from accounts other than those mapped in KYC are not accepted. Hence there is no third party security pay-in.

 

• Sending Contract Notes, Daily Margin Statements, Quarterly Statement of accounts to Clients:

We have the policy of sending Contract Notes and Daily Margin Statements to Clients electronically to their email ID within 24 hours of execution of trades. The Contract notes and Daily Margin Statements are displayed on our web site. The clients can login to website and view their contract notes. The mail which is bounced are resend to the clients within 24 hours , if the mail is delivered the next time it is sent then the log for the same is maintained. The mail which is re-bounced, the physical contract notes and margin statement are issued. ECN logs are maintained for documents/statements delivered to the clients electronically.

• The statement of funds/ securities are sent to the clients as per consented by them monthly or quarterly.
• Contract notes are sent to all clients from the head office/dealing office. The address and the contact number of the office generating the documents are mentioned on the documents.
• Clients who have provided personal email id to us in the ECN Consent will only be sent electronic documents. No email ids will be created for the clients for sending of Contact Notes/documents.
• Change of email id will be accepted only on the basis of written request received from the client himself and not by his power of attorney. 

 

• Risk Management

 

• We have margin based RMS system which is monitored on daily basis.This means that every transaction entered for the client at the front office will be executed only if the same is within the parameters set by and approved by the RMS Department.  Client may take exposure upto the amount of margin available with us. Client may not be allowed to take position in case of non-availability /shortage of margin as per RMS policy of the company. The existing position of the client is also liable to square off /close out without giving notice due to shortage of margin / non making of payment for their payin obligation /outstanding debts. The director / RMS head are allowed to authorize diversions as may be required in the policy, however there may not be any document as those diversions would be of normal nature and maintaining record of the same would be difficult.
• The clients with debit balances are closely monitored. The RMS department takes extra precaution on daily basis to ensure that the company does not incur any bad debts on such clients.
• The management is focused at timely collection of funds from its clients and to try to see that there are no outstanding debts.

• Liquidation of client position

 

• Without prejudice to the stock brokers other right (Including the right to refer the matter to arbitration) the stock broker shall be entitled to liquidate/square off / close out all or any of the clients position without giving notice to the client for non payment of margins or other amounts including the pay in obligation, outstanding debts etc and adjust the proceeds of such liquidation/close out if any against the clients liabilities / obligations.

• The clients are informed that its position would be squared off in case of margin/ pay-in default by way of liquidation clause in the KYC/ client registration documents. Such communication is detailing the exact situations wherein such measures of squaring off shall be undertaken by the member.

 

• The clients are given reasonable opportunity to the client to bring required margin in case of square off positions. There are Telephonic as well email reminders given to the clients. The clients are aware of the fact that there will be square off of client position as they  have been informed of the situation and have been reminded many times to avoid this default. There is no separate written authorization taken from the client.

• No separate records are maintained for the telephonic calls and email reminders made to the clients for margin.
• The policy and procedures for settlement of shortages in obligations arising out of internal netting of trade is as under:

 

• On Pay- In- Day

The short delivering client is debited by an amount (provisional) equivalent to closing price of T+1 day. The internal shortages will be purchased from the market and the purchase considerations (brokerage, other charges, statutory taxes & levies) is debited to the short delivering (seller)  client.

• On  Auction-Day 

Provisional amount debited will be reversed on this day. If the securities cannot be purchased from market due to any force majeure condition , the short delivering seller is debited at the closing rate on T+2 day or Auction Day on exchange +10% where the delivery is matched partially or fully at the exchange clearing , the delivery and debits/credits shall be as per the Exchange debits/credits shall be as per the Exchange debits and credits.

• In cases of securities having corporate actions all cases of short delivery of cum transactions which cannot be auctioned on cum basis or where the cum basis auctioned on cum basis or where the cum basis auction payout is after the book closure / record date, would be compulsorily closed out at higher of 10% above the official closing price on the auction day or the highest traded price from first trading day of the settlement till the auction day.

 

• Policy of internal shortage

• Without prejudice to the stock brokers other right (Including the right to refer the matter to arbitration) the stock broker shall be entitled to liquidate/close out all or any of the clients position without giving notice to the client for non payment of margins or other amounts including the pay in obligation outstanding debts etc and adjust the proceeds of such liquidation/close out if any against the clients liabilities / obligations.

 

The policy and procedures for settlement of shortages in obligations arising out of internal netting of trade is as under:

• On Pay- In- Day

The short delivering client is debited by an amount (provisional) equivalent to closing price of T+1 day. The internal shortages will be purchased from the market and the purchase considerations (brokerage, other charges, statutory taxes & levies) is debited to the  short delivering (seller)  client.

• On  Auction-Day 

Provisional amount debited will be reversed on this day. If the securities cannot be purchased from market due to any force majeure condition , the short delivering seller is debited at the closing rate on T+2 day or Auction Day on exchange +10% where the delivery is matched partially or fully at the exchange clearing , the delivery and debits/credits shall be as per the Exchange debits/credits shall be as per the Exchange debits and credits.

• In cases of securities having corporate actions all cases of short delivery of cum transactions which cannot be auctioned on cum basis or where the cum basis auctioned on cum basis or where the cum basis auction payout is after the book closure / record date , would be compulsorily closed out at higher of 10% above the official closing price on the auction day or the highest traded price from first trading day of the settlement till the auction day.

• Transfer of Trades:
• Please refer to the policy on modification to client codes post trade execution and reporting of such Client Code Modifications made in view of SEBI Circular CIR/DNPD/6/2011 dt. July 05, 2011.

 

• Monitoring of Sub broker & Branches:

• A person is considered for sub broker only after assessing the financial position, business capacity, experience, past operations etc. A sub broker is personally interviewed by managing director and only if found proper, further action for making a sub broker by SEBI / Exchange application is considered. 
• Sub brokers usually operate from the registered office of the company and there all activities are under the observations of the organization. The records of sub broker is periodically verified by company officials to verify that all statutory and other dues are being paid on timely basis by the sub broker.
• In case of sub broker operating from the premise other than registered office of the company for which company officials takes surprise visits of such locations twice in a month to assure their activities are in compliance with the regulations.
• The organization has proper demarcation of work and responsibility within the organization. The PI-PO staff intimates the client for their payin obligations on a daily basis at the same time they confirm the payouts to the clients on a daily basis. They also reconcile all their records on daily as well as weekly basis.
• Periodical Sub – broker audits are done and all the areas as suggested by the exchange are duly taken care of.
• The organization has no branches. Hence no aspects related to branch opening, management and closure have been decided and documented. As and when the company decides to open a branch the policies related to it will be devised and informed to the members of staff and the clients as well.

 

• Operations & Compliance requirements:

• The role of Compliance officer is to monitor the operations and compliance requirements of the organization.
• The company has the system of getting its accounts audited periodically  to ensure all compliances are  done on a timely basis.
• The company has also implemented compliance calendar to keep proper control over the operations and compliances.

 

• Payment of Dividend:

• The company receives dividend on the client shares directly in the client bank account.
• The company pays all the dividends received on behalf of clients with in 90 days of receiving the same. The client dividend account is nullified every month to see that client dividend is credited to respective client account.

 

• Continuity planning / Alternate plan in case of disaster etc.:

• For Front office operations the company has provided a power backup to all dealing terminals so as to compensate for power supply interruption. The front office has connectivity to exchange via two leased lines and a backup provision for internet failure as well.
• For Back office Operations Company takes daily backup into hard disk of server. Apart from internal backup company also takes weekly external backup on DVDs and keeps copy of it in a remote place (Managing Director’s residence) for safety custody.
• The backups are regularly tested to see their usability in case of any disaster.

 

• Investor Grievance Policy:

• The register of complaints is maintained at the Dealing office centrally under the observation and control of the director.
• All the clients are informed that in case of any grievance they have an option of writing the same in the Investor Grievance Register maintained at the office or can report the grievance through email or can meet the director to discuss any point of observation as may be required.
• The e-mail id for redressal of investor grievances is informed to the clients by the quarterly statements sent and even on the CONTRACT NOTES sent to the client or website of the organization.
• There are no investor complaints pending with any of the Exchanges.
• We have not received any complaint till date and hence no complaints are recorded in the Register of Complaints.
• The director / senior employee is responsible to see that there are no investors pending.
• There is an escalation mechanism in case if any investor complaint does not get redressed by the director incharge or by the senior staff.
• As no complaints are received, requirement of analysis is not required, however the same will be analysed as and when complaints are received.
• The director personally looks into the regular operations and monitors and controls the operations to ensure that cash, cheque and demand drafts received from clients at branches are properly accounted in the respective client ledger only.
• Any transactions entered into for dormant accounts (not being operated in last 2 years), then before entering the transaction the dealers enquires about the same from the head dealer / director before entering the trade and thus enters a trade only after verifying the authenticity of client entering the order.
• No employee of the organization at the HO or branches are exercising POA to operate client’s bank and demat accounts.

 

• Allotment, Surrender of trading terminals:

The Limit setting of the terminals is decided on the basis of the funds margin and securities value given to the member. Every terminal has a specific dealer and every dealer is assigned his own set of clientele who he has to cater to.

• In case any terminal gets surrendered then the client would be mapped to the head office for further trading and in case if the client specifies any particular location from where he want to trade then the client is mapped to that terminal.
• The terminals are installed / activated only after complying with the regulatory requirement of informing Exchange and uploading of the details of the authorized user.
• The transactions entered through every terminal is overlooked by the RMS department / compliance officer. Proper checks and analysis of trades done are done on daily basis. Hence the possibility of terminals being used for unauthorized purposes is negligible.
• The member’s controls and the auditors during their visit check that only authorized trading software is used by the branch offices and sub-broker offices.
• The visits are made by the company staff or the auditors during their visit the branches check that only authorized persons are operating the terminal. Additionally the company carries out proper due diligence before opening of the branch or sub-broker is carried out. The directors / senior management spend regular time to access the working of the branches and sub-brokers and various concerns including the volume vis a vis clients vis a vis clients profile and activity pattern are considered.

 

 

 

POLICY ON MODIFICATION OF TRADES (Client Codes)

The below mentioned policy on modification of Client codes in various Trades has been approved by the Board of Directors in their meeting held on 11th July, 2011. All the employees are required to follow the same and take due care for its proper implementation.

1. Objective:

To frame the guidelines for modification to client codes post trade execution and reporting of such Client Code Modifications.(in view of SEBI Circular CIR/DNPD/6/2011 dt. July 05, 2011)

2. Brief about Client Code Modification:

Client Code Modification means modification / change of the client codes after execution of trades. Stock Exchanges provide a facility to modify any client code after the trade has been executed to rectify any error or wrong data entry done by the dealers at the time of punching orders. However, such Client Code modification is subject to certain guidelines as to the time limit within which the client code modification is to be carried out, terminal / system on which such modifications can be done etc. The facility is mainly to provide a system for modification of client codes in case genuine errors in punching / placing the orders. It is to be used as an exception and not a routine. To prevent misuse of the facility, Stock Exchanges levy penalty / fine for all non-institutional client code modifications.

3. Scope of the Policy:

This policy covers all the Client Code Modifications carried out / to be carried out in any of the client accounts controlled by HO, subject to the guidelines issued by the SEBI / Stock Exchanges from time to time, in any segment of any exchange for which Sethi Finmart Pvt. Ltd. (SFPL) is a member broker.
The reason for modification has to be ascertained and analyzed and genuineness is to be established and also it’s impact on the clients should be studied before the modification.
 If voice recording is in practice, the same should be studied.

4. “Error Trades” means the trades which will be modified / to be modified / allowed to be modified subject to guidelines of the SEBI / Stock Exchanges. Accordingly Members are permitted to change client codes of non-institutional clients only for the following objective criteria :
a) Error due to communication and/or punching or typing such that the original client code/name and the modified client code/name are similar to each other.
b) Modification within relatives (Relative for this purpose would mean ‘Relative’ as defined under sec. 6 the Companies Act, 1956).
5. General Conditions:

• Any transfer of trade (institutional or non-institutional) to error account of the broker would not be treated as modification of client code and would not attract any amount of penalty, provided the trades in error account are subsequently liquidated in the market and not shifted to some other client code.
• For easy identification of error account, members are required to register a fresh client code as “ERROR” in the UCC database of the Exchange for the account which is classified by them as error account.
• Members are required to inform the Exchange on a daily basis by end of day, the reasons for modification of client codes of non-institutional trades based on the aforesaid objective criteria, which shall be taken into consideration at the time of inspection.

 

 6. Place for Client Code Modification:

• Any Client Code Modification shall that the issue should be reported to the Director. The Director shall try to find out the reason why such mistake occurred. He should satisfy himself that it is genuine and the same is required to be done to protect the interests of the client.
• Any Client Code Modification can be carried out only with the approval of the Director. Hence the facility to modify the client codes should be available only at the Manager level and should not be given to the branches/franchise/sub-brokers.
• Training program should be conducted to all the Dealers and they should be explained how code modifications can be misused and what steps should be taken to avoid the same. It also should be explained that code modifications should not be encouraged to the clients except for cases like ‘punching errors’/’typing errors’.
•  A register is to be maintained for recording all the code modifications with details like error code, correct code, scrip name quantity, client name, the name of the dealer who punched the code, the  explanation of the dealer/Branch Manager, the ‘analysis /study’ of the authorised Manager and his  approval/disapproval for modification.
• Finally the decision of the authorised Manager should be ratified later by the Director.

7. Penalty:

All cases of modification of client codes of non-institutional trades executed on the Exchange and not transferred to broker error account, shall be liable for a penalty of 1% of value of non-institutional trades modified if value of non-institutional trades modified as a percentage of total value of non-institutional trades executed is less than or equal to 5% and penalty of 2% if modification exceeds 5%, in a segment during a month.

The penalty or fine, if any, levied on SFPL for any wrong trade occurred due to any miscommunication from the client / authorized representative of the client shall be borne by the client.

 

Members and employees of SFPL are requested to execute the trades after being very sure about the Codes of the client and the RMS is strictly advised to modify client codes of trades only to rectify genuine error in entry of client code at the time of placing /modifying the related order.